Federal  taxation  of  g^s  wells 


R OS we  11  H,  Johnson 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

GIFT  OF 
R.   E.   Collom 


The  RALPH  D.  REED  LIBRARY 

DKl'AKTMKNT  OF  GEOLOtiY 
UNIVKRSITY  OF  CAI.IFOUNIA. 

IA>W  ANOKl.KS,   CAI.IK. 


Federal  Taxation  of  Gas  Wells 


By  ROSWELL  H.  JOHNSON 


FIFTEENTH  ANNUAL  MEETING 

OF 

The  Natural  Gas  Association  of  America 


Broadway  Auditorium 

BUFFALO 

May  )7lh.  18th,  19th  and  20th,   1920 

WM.  B.  WAY.  Secretary 


Ceo/ogy  Q^^^ 


FEDERAL  TAXATION  OF  GAS  WELLS 


By  Roswell  H.  Johnson,  Rttsburgh,  Pa. 


To  prepare  the  tax  return  oi  a  natural  gas  company,  one 
should  provide  himself  with  the  following  literature : 

1.  A  copy  of  the  Act,  which  is  Public  Document  No.  254, 
65th  Congress.     It  may  be  had  on  application  to  a  congressman. 

2.  Bureau  of   Mines  Bulletin,  No.   177. 

3.  Regulations  33  and  45  (edition  with  addenda)  of  the 
Treasury  Department. 

4.  Form  O,  of  the  Treasury  Department. 

5.  The  Manual  of  the  Oil  and  Gas  Industry,  published  by 
the  Department.  This  Manual  is  now  out  of  print,  but  a  private 
reprint  has  been  published  by  John  Wiley  and  Sons,  432  Fourth 
Avenue,  New  York. 

6.  Application  should  be  made  to  the  Bureau  of  Mines  to 
receive  the  new  bulletin  on  decline  curves  by  Willard  W.  Cutler, 
Jr.,  when  it  appears. 

7.  Subscribe  to  the  Income  Tax  Bulletin  Service,  Superin- 
tendent of  Documents,  Washington,  D.  C,  $2.00. 

INCOME   TAX   FOR    IQIQ 

In  preparing  the  tax  for  1919,  one  starts  with  Form  O.  The 
first  schedules  to  be  filled  out  are  I,  IV,  VI  &  VII.  The  remain- 
ing schedules  are  dependent  upon  these.  Schedule  I  calls  for  cost 
of  property  as  of  date  of  acquisition.  The  blanks  must  be  filled 
out  separately  for  each  producing  lease  and  it  offers  little  difficulty 
except  that  some  of  the  data  may  not  be  obtainable.  In  some  of 
such  cases  the  bonus  may  have  been  only  nominal  so  that  little 
barm  is  suffered  under  those  circumstances.  Where  the  bonus 
was  nominal  and  other  expenses  were  charged  as  such  and  one 
knows  that  the  capital  to  be  ascertained  while  obtainable  would 


543396 


not  justify  the  search,  one  is  justified  in  writing  across  a  number 
of  these  entries  "cost  only  nominal  and  not  claimed."  Nearly 
every  gas  company  has  a  number  of  abandoned  leases,  the  whole 
cost  of  which  is  so  low  and  always  so  difificult  to  ascertain  that 
it  is  advisable  to  merely  state  that  there  have  been  such  and  the 
costs  were  not  large  enough  to  warrant  preparation  of  the  data 
to  claim  the  invested  capital. 

Schedules  IV.  VI  and  VII  offer  little  difficulty  and  lead  u^) 
to  the  very'  difficult  Schedule  II.  This  is  the  valuation  schedule 
and  is  made  out  for  properties  as  of  March  i,  191 3,  the  beginning 
of  the  income  tax  law.  The  most  obvious  way  to  ascertain  "fair 
exchange  value"  would  be  to  cite  sales  of  similar  properties. 
Where  such  sales  are  of  truly  similar  properties  and  between 
a  willing  buyer  and  willing  seller  at  the  same  date  it  is  the  exact 
index  of  "fair  exchange  value."  Such  sales  are  almost  always 
non-existent  so  it  becomes  a  question  of  how  dissimilar  the  prop- 
erty may  be  and  yet  permit  still  the  analogy  to  be  drawn.  The 
sale  must  have  taken  place  at  very  nearly  the  same  time  because 
the  prospect  of  future  price  changes  is  constantly  changing  and 
hence,  the  tone  of  the  market.  Lastly,  there  must  be  the  condi- 
tion of  a  willing  buyer  and  a  willing  seller,  a  condition  which  by 
no  means  always  pertains  in -the  gas  business,  since  there  is  gen- 
erally a  restriction  on  the  freedom  of  exchange  between  a  com- 
pany or  individual  without  pipe  line  and  one  with  a  pij>e  line  and 
selling  to  consumers.  Only  two  gas  pools  furnish  sales  of  usuable 
sort,  so  far  as  known  to  us,  so  that  probably  very  many  of  the 
gas  properties  must  be  appraised  analytically.  These  pools,  Mc- 
Keesport  and  Elk  City  are  each  unique  and  not  comparable  to 
other  pools. 

The  appraisal  of  a  gas  property  is  vastly  more  difficult  than 
that  of  an  oil  property,  and  furthermore,  there  has  been  very 
much  less  written  and  very  much  less  data  collected  that  woul.I 
be  of  use  in  such  appraisal.  Yet.  such  appraisals  can  l>e  and  are 
made. 

The  method  recommended  is  to  establish  first  a  predicted 
price  curve  for  what  may  reasonably  have  been  expected  to  be 
the  probable  future  prices  at  the  timo  of  appraisal.  This  is  best 
obtained  by  taking  a  curve  of  past  prices  and  then  continuing  it 


into  the  future  on  the  same  average  percentage  o£  advance.  This 
gives  a  curve  that  is  too  conservative  but  safe,  since  it  never 
reaches  even  the  present  price  of  artificial  gas  in  the  Hfe  of  a 
well.  This  extrapolation  is  most  conveniently  done  by  drawing 
a  straight  line  on  semi-logarithmic  paper  which  automatically 
gives  a  regular  percentage  advance  in  successive  years.  One 
may  also  calculate  in  the  same  way  the  advance  in  mainte- 
nance costs.  From  these  one  may  get  an  average  expected  profit 
per  unit  for  each  successive  year  in  the  future,  until  the  abandon 
ment  of  the  well.  The  price  at  the  we-i.  not  that  to  the  consumer 
must  be  used. 

The  next  task  is  to  get  the  yield  which  the  well  will  produce 
in  the  successive  years.  Where  the  wells  are  metered,  as  at 
McKeesport,  this  is  a  less  difficult  task,  but  in  other  instances 
yield  cannot  be  had  directly  and  the  capacity  must  be  obtained  at 
the  successive  inter\'als  by  calculating  from  the  open  flow  read- 
ings or  the  minvite  pressures  which  have  been  read.  Minute 
pressures  taken  by  merely  closing  the  gate  into  the  line  at  that 
line  pressure  give  a  figure  quite  different  from  the  open  fiovv 
capacity  obtained  by  the  minute  pressure  formula  if  taken  after 
blowing.  The  open  flow  capacity  obtained  is  best  reduced  to 
yield  values  for  the  several  years  by  the  use  of  the  ratios  given 
given  by  \\'eymouth.  However,  if  the  history  of  a  line  pressure 
is  so  erratic  that  no  regular  change  of  ratio  can  be  used,  one  is 
forced  in  these  cases  to  fall  back  on  the  general  ratio  of  yield 
to  capacity.  Wyer  gives  25%  as  an  average  value  but  this 
should  be  ascertained  for  the  company  or  pool  in  question. 
However,  if  minute  pressure  from  line  is  used  to  compute  a 
"capacity",  for  which  the  name  "going  capacity"  is  proposed,  the 
yield  will  constitute  a  higher  percentage  thereof. 

The  greatest  difficulty  in  working  out  a  gas  capacity  or  yield 
decline  curve,  lies  in  the  fact  that  a  number  of  the  wells  are 
pulled  on  so  much  less,  either  becau.se  their  well  pressure  is  op- 
]josed  to  a  relativel}'  high  line  pressure  or  else  because  they  are 
lield  as  reserve  so  that  they  cannot  be  used  in  working  out  the 
decline  curve  of  a  typical  ^^■ell.  After  the  expected  profits  are 
determined  each  year  by  this  method  each  one  is  multiplied  by  a 
compound  discount  factor  for  its  \'car.     None  of  the  published 


"present  worth"  or  compound  discount  tables  are  available  as 
they  all  start  with  a  full  ^•ear  and  assume  that  the  money  is  not 
realized  till  the  end  of  the  year.  It  should  be  observed  that  if  the 
appraisal  is  of  IMarch  i,  1913.  that  the  compound  discount  factors 
should  be  calculated  en  the  basis  that  the  average  dollar  is  re- 
ceived one-half  of  the  period  from  the  beginning,  i.  e.  at  the  end 
of  five  months  in  the  first  ten  months  period  and  at  the  end  of 
six  months  in  the  subsequent  periods.  The  rate  of  compound 
discount  to  be  used  is  influenced  by  ihe  reluctance  of  the  in- 
vestor to  invest  under  the  circumstances.  To  the  sum  of  the 
discounted  future  expected  profits  add  the  discounted  value  of 
the  eventual  salvage. 

The  composite  curve  can  be  constructed  following  the 
method  of  Deal's  family  curve.  This  can  )ye  done  by  his  graphic 
method  for  which  the  term  "shingling"  is  proposed  or  by  calcu- 
lation from  the  corresponding  parts  of  many  well  declines  as 
described  in  the  Manual  of  the  Oil  and  Gas  Industry  for  which 
the  term  "segmental"  curve  is  proposed.  If  the  famil)^  curve 
constructed  by  either  method  does  not  extend  to  the  economic 
limit  it  should  be  extrapolated  by  finding  the  nearest  suitable 
hyperbola  by  the  method  of  shifting  the  origin  or  by  using  the 
exponential  curv^e  if  it  gives  a  better  fit.  Either  method  is  easy 
because  they  constitute  straight  lines  on  logarithmic  and  semi- 
logarithmic  paper  respectfully. 

Except  under  conditions  of  inflation  gas  property  buyers  are 
unwilling  to  pay  up  to  the  full  productive  value  expected.  The 
compound  discount  factor  used  may  recognize  any  needed  dis- 
count for  risk  or  a  further  discount  of  risk  may  be  necessary  in 
the  appraisal  of  some  wells.  However  in  the  valuation  of  un- 
drilled  acreage,  a  further  deduction  as  a  risk  factor  and'  for  de- 
ferment resulting  in  loss  of  pressure  will  nearly  always  be  nec- 
essary. 

Form  O  calls  for  the  valuation  and  classification  of  every 
single  producing  lease.  Having  appraised  the  well  and  its  sup- 
porting acreage,  the  remainuig  acreage  in  the  lease  should  be 
given  a  percentage  of  probability  of  becoming  productive.  The 
value  of  the  productive  acreage  as  acreage  multiplied  by  this 
probability  and  less  deduction  for  reduction  of  pressure  because 


of  deferment  of  drilling  and  risk,  as  conditions  may  warrant, 
give  us  a  value  for  this  remainmg  portion  of  the  lease. 

Non-producing  leases  may  be  reported  under  one  head,  un- 
developed acreage,  as  a  more  detailed  classification  would  be  of 
no  consequence  to  the  Department  as  it  cannot  enter  capital  sum 
until  producing. 

Our  next  step  is  to  calculate  the  value  of  the  physical  prop- 
erties as  of  the  date  of  appraisal.  If  installed  prior  to  1913  its 
original  cost  must  be  depreciated  to  a  1913  basis.  The  rate  of 
depreciation  of  the  well  equipment  should  be  calculated  on  a 
straight  line  for  the  estimated  life  of  the  well. 

The  fair  exchange  value  of  the  whole  property  must  now 
have  deducted  from  it  the  value  of  the  physical  property  as  of 
tlie  date  of  appraisal.  This  value  of  physical  property  constitutes 
the  depreciable  capital  sum  after  subtracting  a  percentage 
equivalent  to  the  eventual  salvage.  The  fair  exchange  value  less 
the  cost  of  the  physical  property  is  the  depletable  capital  sum 
and  represents  value  attributed  solely  to  the  gas  in  the  ground. 
It  in  turn,  however,  should  be  divided  into  three  parts,  one  rep- 
resenting the  cost  of  the  gas  reserve,  one  that  of  drilling  and 
exploration,  earnings  on  both  of  which  are  merely  a  return  of 
capital  and  the  remaining  portion  of  the  value  the  earnings  from 
which  are  on  an  appreciation  shown  by  the  appraisal  over  cost 
so  that  such  earnings  can  be  transferred  to  surplus -and  increase 
the  invested  capital,  provided  they  are  not  distributed  as  divi- 
dends. 

We  now  have  the  amount  which  is  to>  be  taken  as  depletion 
and  depreciation  allowance  through  the  years  in  proportion  to 
which  depreciation  and  depletion  is  sustained.  It  remains  to  as- 
certain the  rate  at  which  the  depletion  allowances  are  to  be  taken 
for  use  in  Schedule  V  on  De]:)letion,  and  that  not  from  191 3,  but 
because  also  used  in  depletion  of  invested  capital  prior  to  1913, 
from  the  drilling  of  the  first  well.  To  do  this,  one  must  first  get 
the  estimated  future  recoverable  reserve  of  gas  as  of  the  date 
of  completion  This  is  a  technical  procedure  for  which  the  reader 
is  referred  to  Bulletin  177,  Bureau  of  Mines  and  the  foregoing 
paragraphs  on  appraisal. 


The  salvage  value  received  in  the  terminal  year  is  a  further 
deduction  from  income  of  that  year  since  it  is  a  return  of  capital. 

The  rate  of  depletion  is  based  in  the  regulations  upon  the 
rate  of  decline  in  rock  pressure.  This  method  was  chosen  as 
against  yield  or  capacity  because  it  was  known  that  in  the  case 
of  many  small  operators  yield  or  even  capacity  figures  could  not 
be  had  by  pool  units  and  the  regulations  demand  separate  com- 
putation by  pool  units  or,  if  not  feasible,  geographical  districts. 
It  is  expressly  stated,  howicver,  that  depletion  need  not  necessarily 
be  worked  on  a  rock  pressure  basis  if  there  can  be  shown  good 
reasons  why  any  other  method  would  give  a  better  result.  There 
are  two  circumstances  where  rock  pressure  decline  is  not  ade- 
quate. The  first  is  where  water  has  been  encroaching.  Obvious- 
ly, if  the  volume  occupied  by  the  gas  had  been  contracting  as  the 
result  of  the  encroachment  of  water,  the  pressure  will  not  go 
down  as  rapidly  although  the  depletion  may  have  been  as  great. 
It  is  for  this  reason  that  it  is  very  important  to  keep  a  history 
of  the  water  in  every  gas  pool,  so  that  if  water  is  encroaching, 
a  more  rapid  depletion  can  be  obtained  than  would  be  shown  in 
the  rock  pressure  curves.  The  correction  varies  with  the  pro- 
portionate volume  of  the  sand  flooded. 

A  second  circumstance,  where  rock  pressure  decline  is  alone 
ir^adequate  is  where  a  pool  has  been  pulled  upon  rapidly  one 
year,  and  the  next  year  for  some  reason,  such  as  a  new  gas  pool 
coming  in  elsewhere  or  because  of  a  partially  mild  season,  or 
desire  to  use  it  in  part  as  reserve,  it  is  pulled  upon  less  rapidly. 
It  not  infrequently  happens  under  such  circumstances,  that  there 
is  an  actual  gain  in  rock  pressure  and  there  may  even  be  an  actual 
gain  in  capacity.  It  is  clear  that  depletion  is  to  be  claimed  in 
these  years  if  gas  was  actually  taken  fronr  the  well  even  though 
there  has  been  a  gain  in  the  apparent  condition  of  the  well.  This 
may  be  calculated  by  using  an  actual  yield  curve  instead  of  rock 
pressure  if  that  can  be  obtained,  or  if  that  is  not  possible  then 
we  must  recompute  the  depletions  so  that  some  is  shown  in  each 
year  and  the  whole  amount  is  determined  from  initial  to  last 
pressure  is  allocated  to  the  years  mainly  on  the  basis  of  the  extent 
to  which  the  wells  were  known  to  be  drawn  upon. 


The  construction  of  the  curve  for  ascertaining  the  rate  of 
depletion  is  essentially  like  that  of  curves  for  appraisal,  except 
that  in  appraisal  the  curves  must  be  one  of  yield  and  the  valua- 
tion is  set  up  once  for  all,  and  no  information  subsequent  to  the 
date  of  appraisal  can  be  utilized.  Whereas  in  making  out  the 
depletion  rate  rock  pressure,  yield  or  other  index  may  be  used. 
All  the  data  is  utilizable  and  revision  from  year  to  year  is  per- 
missible and  indeed  desired  in  the  Regulations. 

The  question  of  what  the  economic  limit,  i.  e.,  how  small 
a  well  must  be  before  it  must  be  abandoned  is  a  matter  to  be 
determined  for  each  field  recognizing  that  it  will  become  regularl}^ 
lower  in  the  future. 

While  the  depreciable  capital  sum  in  so  far  as  represented 
by  well  equipment  should  be  depreciated  on  a  straight  line  repre- 
senting the  life  of  the  well,  this  does  not  apply  to  other  features 
such  as  pipe  lines,  marketing  facilities,  etc.,  which  receives  a 
straight  line  depreciation  set  upon  that  experience  has  shown 
to  be  their  p'robable  life  which  frequently  exceeds  the  life  of  the 
wells.  We  may  add  each  year  the  money  invested  in  new  physical 
property  and  also  the  money  spent  in  new  development  work, 
one  going  into  the  depreciable  capital  sum  and  the  other  into  the 
depletable  capital  sum.  Cost  should  always  be  entered  unless 
the  well  is  such  as  to  permit  the  use  of  ascertained  value  under 
the  Regulations. 

The  conditions  which  give  the  discovery  appraisal  right  are 
as  follows  :  first,  the  well  must  have  a  value  which  is  dispropor- 
tionate to  the  cost.  Further,  the  acres  of  the  reservoir  appraised 
must  have  been  purchased  or  leased  prior  to  its  having  become 
a  proven  area,  and  it  must  not  have  previously  received  a  discov- 
ery appraisal. 

The  definition  of  what  constitutes  a  proven  area  is  given 
by  the  Regulations  as  being  the  i6o  acres  of  that  reservoir  sur- 
rounding the  hole  in  question.  From  this  it  follows  that  a  well 
which  strikes  gas  in  a  dififerent  reservoir  altho  in  the  same  area 
from  that  in  which  the  160  acres  was  proven  may  constitute  a 
discovery.  The  area  to  be  appraised  in  case  of  discovery,  is  all 
within  "the  exterior  limit  of  a  continuous  tract  held  under  leases 
or  in  fee  by  the  taxpayer"  vv^hich  belongs  to  the  lessee  and  which 


10 

is  included  within  this  160  acre  square  surrounding  the  dis- 
covery well.  In  the  case  that  the  lease  has  had  a  former  ap- 
praisal as  of  1913,  only  the  value  newly  created  is  to  be  used. 

In  appraising  a  discovery  well,  one  is  of  course,  limited  to 
the  knowledge  of  that  date.  This  involves  the  use  of  a  differ- 
ent predicted  price  curve,  as  of  that  date  rather  than  that  one 
would  have  used  March  i,  191 3.  The  law  permits  the  appraisal 
to  be  of  the  date  of  discovery  or  30  days  thereafter.  One  should 
appraise,  of  course,  at  the  earlier  date,  unless  the  value  increased 
during  the  30  days,  because  depletion  is  most  rapid  in  the  first 
30  days  and  is  not  allowed  until  a  valuation  is  established  on  the 
property.  Observe  that  the  unit  to  be  appraised  is  not  only  the 
well  and  its  supporting  acreage,  but  the  deposit  underlying  the 
acreage  of  the  reservc^r  extending  beyond  this,  which  may  in 
some  cases  be  as  much  as  r6o  acres.  The  Treasury  Department 
will  not  allow  all  of  this  to  be  appraised  as  if  it  were  truly  proven 
or  100%  probable,  although  it  is  legally  so  called,  but  rather  it 
will  be  appraised  on  the  basis  of  "fair  exchange  value."  To  as- 
certain its  fair  exchange  value  one  can,  of  course,  fall  back  on 
analogous  sales  as  before  or  else  one  may  assume  a  percentage 
value  of  the  inner  acreage,  which  supported  the  first  well,  as  ex- 
pressing its  probability  of  being  productive.  If  we  allow  forty 
acres  to  the  discovery  gas  well  we  would  then  have  120  additional 
acres  or  less  for  appraisal.  The  value  of  the  central  supporting 
acres  is  derived  from  what  it  was  when  newly  drilled  by  sub- 
tracting the  cost  of  the  material  and  drilling.  The  total  usually 
requires  a  further  deduction  because  of  the  risk  of  investment 
and  loss  of  pressure  from  deferment  of  drilling. 

If  an  area  is  proven  for  oil,  the  discovery  of  the  first  com- 
mercial gas  well  if  commercial  as  to  its  gas  alone,  in  this 
area  will  give  a  discovery  appraisal  for  gas  if  the  other  conditions 
are   fulfilled. 

Where  gas  has  a  gasoline  value  commercial  in  amount,  either 
by  compression  or  absorption  method,  a  separate  value  should  be 
placed  on  this  product  and  it  is  to  be  included  in  both  the  191 3 
and  discovery  appraisal  where  it  would  have  been  considered  by 
a  buyer  or  seller  in  arriving  at  a  price  at  the  time  of  appraisal, 
but  the  gasoline  is  treated  as  a  part  of  the  gas  where  the  well  is 


II 

a  commercial  gas  well,  not  as  a  third  product.  Where  an  oil  well 
produces  casinghead  gas  in  an  amount  not  sufficient  to  justify 
drilling  for  the  casinghead  gas  alone,  it  is  an  oil  well  with  a  gas 
by-product  not   a   "gas  well." 

INCOME  TAX    LAW    FOR    I917   RETURN 

While  the  income  tax  law  applying  to  191 8  is  worked  out  on 
the  same  basis  with  differing  rates  than  1919,  the  income  tax 
law  applying  to  1916  and  1917  has  one  important  difference, 
namely,  that  the  depletion  allowance  to  the  lessee  is  allowed  only 
on  cost,  not  on  appraisal  value,  and  that  there  is  no  discovery 
appraisal  right.  But  in  the  case  of  the  lessor,  he  may  have  de- 
pletion allowances  based  as  in  the  law  of  1918  with  reference  to 
appraisal  of  March  i,  1913,  but  not  discoveries.  Note,  how- 
ever, that  discoveries  in  191 7  and  back  to  March  i,  1913  are 
permitted  for  purposes  of  calculating  the  tax  for  1918  and 
thereafter. 

The  laws  applying  to  1913,  1914,  and  1915  grant  an  allow- 
ance for  depletion  only  to  an  extent  of  5%.  The  law  does  not 
permit  us  to  go  back  and  redress  this  deficiency  which  is  now 
admitted  to  be  inadequate,  and  it  is  necessary  to  take  off  a  sus- 
tained depletion  in  calculating  tax  for  later  years  even  though 
it  was  not  allowed  at  the  time.  This  5%  limit  does  not  apply, 
moreover,  to  the  depletion  of  invested  capital. 

EXCESS  PROFITS  TAX   FOR   I9I9 

In  w^orking  out  the  excess  profits  tax  the  principal  peculiarity 
of  interest  in  this  connection  is  in  the  matter  of  adding  surplus. 
Invested  capital  is  capital  actually  invested,  but  where  a  propor- 
tion of  the  earnings  is  attributable  to  capital  w-hich  is  apprecia- 
tion shown  in  the  appraisal  as  over  cost,  then  we  may  add 
this  as  surplus  to  invested  capital  for  the  next  year,  provided  it 
was  not  distributed  as  dividends. 

In  making  out  net  incomes  for  computing  excess  profits  tax, 
depletion  and  depreciation  should  be  deducted.  The  invested 
capital  itself  is  also  cut  down  each  year  by  depletion  and  depre- 
ciation although  it  may  also  be  added  to  by  newly  invested  cap- 
ital and  additions  to  surplus. 


12 

In  summary,  gas  companies  must  realize  the  great  amount 
of  labor  in  merely  hunting  up  the  data  to  fill  in  Form  O  and  its 
supporting  blanks  for  each  producing  lease,  entirely  aside  from 
the  technical  matters  of  establishing  proper  valuation,  recogniz- 
ing which  wells  have  the  discovery  right,  properly  valuating 
these  discoveries  and  working  out  the  rate  of  depletion. 

The  task  commands  vastly  more  attention  than  has  hereto- 
fore been  given  to  taxation.  It  should  be  prepared  for  through- 
out the  year  and  should  alter  methods  of  management  and  ac- 
counting to  make  possible  the  preparation  of  a  report  acceptable 
to  the  Department. 


» 


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